Manatep Bank, a Russian investment bank, has just announced the country's first hostile tender offer for Red October, a confectionery company located in Moscow. As the chief financial officer of the target company, Yuri Yegorov must decide how to respond, how much his company is worth, and what to recommend to the board of directors. The context of the case, the nascent Russian financial system, raises a variety of interesting and complex valuation issues such as determining discount rates in countries with high inflation and unstable governments, uncertain property rights, and poor financial information. The absence of financial and institutional infrastructure provides a stark contrast to financial markets and takeovers in more developed countries.
An entrepreneur's application for a loan to open a small restaurant is rejected. As a consequence, the restaurant's cash position is a concern. The case requires the student to calculate three cash budgets based on expected, optimistic and pessimistic sales projections.
The purpose of this note is to explain the concept of economic value added (EVA) and to show how EVA can be employed as a tool to assess managerial performance and assist in making strategic decisions.
Two partners who own a popular restaurant franchise must decide whether to open an outdoor patio. They must identify differential costs, categorize them as recurring flows (variable or fixed) or one-time flows (investments), perform sensitivity analysis, and calculate the projected return on investment to support their decision.
The theory of competitive advantage is one of the most widely accepted economic principles among economists. The theory, as well as substantial historical evidence, suggest that free trade raises national income, while government intervention in trade relations generally lowers a nation's wealth. In the last few years, however, new theories have led some commentators to question this conclusion. Based on research into imperfectly competitive industries, some of the new theoretical research suggests that it is possible to increase national wealth with specific types of government intervention in trade relations. The research is referred to as the New International Economics, or Strategic Trade theory. While interesting, these trade theories are often misunderstood and used inappropriately. This note introduces four strategic theories of trade. Also discusses several critiques of these theories. A rewritten version of an earlier note.
A leading Indian pharmaceutical company reacts to changes in its industry by trying to reposition along several dimensions from developing markets to developed ones, from bulk drugs toward pharmaceuticals in dosage forms, and from reverse-engineering products developed by others toward original research.
How nations trade and whether they benefit from it are two of the oldest and most important questions in political economy. In the 170 years since David Ricardo formally developed the theory of comparative advantage, it has become one of the principles most widely accepted among professional economists. Despite this wide acceptance in the professional community, the basics of international trade are still poorly understood by many policy makers and casual commentators. This note introduces the theory of comparative advantage. It is divided into four sections. The first presents a short history of the concepts behind comparative advantage. The second develops a simple model with several examples to demonstrate the gains that result from trade between nations. The third briefly covers several extensions of the simple model. Finally, two traditional objections to free trade are reviewed. A rewritten version of an earlier note.
The chief financial officer of Sunshine Juice Company needs to finalize the company's marketing strategy for the upcoming year. Initial results for the launch of the company's product, a four-litre bag-in-a-box orange juice product, had been favourable. The case touches on all aspects of developing a marketing strategy, with emphasis on price setting and distribution.
Highlights and explores how a general manager adds value to the firm at the operational level by managing through people. Discusses how assumptions about human motivation influence the employment contract that the general manager implicitly enters into with the workers and ends with speculation on how the employment contract is fundamentally changing.
Bombardier, a Canadian manufacturer of passenger railcars and market leader in the United States, faces aggressive competition from a new entrant, U.S.-owned Morrison Knudsen, that has come into the industry with closely related capabilities in engineering and transportation construction. Bombardier must decide is how to respond to the loss of market share and the strategic threat posed by the new competitor.
SaleSoft, a start-up firm, markets Comprehensive Sales Automation Solutions (CSAS) that automate a firm's sales, marketing, and service functions. Even though the product has received very favorable responses from prospects, product complexity and a long buying cycle have made it difficult for the firm to convert interest into sales orders. SaleSoft now has an opportunity to sell a part of the total CSAS solution as a stand-alone product. This "Trojan Horse" (TH) product offers an easy way for the firm to enter new customer accounts, gain quick sales, and generate much needed revenues. However, it could potentially distract the firm from its primary objective and cannibalize CSAS sales. SaleSoft needs to decide whether to continue selling CSAS or launch TH. And, the firm needs to develop a detailed marketing strategy to implement this decision.
The focus of this note is to present a risk management framework for current and potential corporate end users of derivatives products in the mid-1990s. Several high profile cases of derivatives problems are presented in the context of the framework. The note also examines where the process has failed and how the failures could have been prevented.
This case documents the origins and development of a collaborative interorganizational system. This system is an experimental broadband network being used to trial both ATM technology and new applications such as the transmission, retrieval and archiving of medical images. Director of LARG*net confronts the difficulties of technological innovation and interorganizational management. It provides an illustration of the technical difficulties in integrating different systems, ensuring security, and the ramifications to an organization's own systems when connectivity with other organizations is attempted. It highlights the fact that IT infrastructure is more than just physical hardware. At the same time it raises the issues of handling accountability and responsibility across organizational boundaries.
As a central component of its Vision 2020 strategy, the city of Wellington, New Zealand has developed preliminary plans to transform itself into a "wired city." The overarching project was called Info City. Info City actually consisted of a collection of sub-projects, each focusing on a different way in which the city could promote and foster the use of information technology to help move toward the "2020 Vision." One of the sub-projects was called City Link. The objective of City Link was to create a high-speed digital communications infrastructure for the downtown business district. Fiber optic cable was to be used to "wire up," simply and inexpensively, the city's downtown businesses, to provide a backbone network that businesses could utilize, however they wished, to make themselves more competitive. A company had recently been formed to bring together a number of parties interested in advancing the project. A telecommunications architecture was being developed, and plans for stringing cable were underway. While Richard Naylor, the project's champion, wasn't sure exactly how the city's businesses would use the cable, he was confident that once the infrastructure was in place, ideas for its utilization would readily emerge. This case provides a setting for exploring the issue of cities "competing," much as do businesses, and the ways in which IT can be utilized in the competition. Also raises interesting social policy questions about who should pay for such an undertaking, who should benefit, and so on.
By 1993, Ecolab has established a dominant market position in the institutional cleaning industry. As the company's principal competitor, Diversify, drives sales aggressively, Ecolab president Al Schuman faces a choice about how best to market Ecolab's offerings. Should Ecolab's sales personnel continue to focus on building relationships first and worrying about numbers only later? Or has the time come to change the firm's approach? Even as Schuman focuses on this choice, there are some faint rumblings of internal dissension.
Northeast Ventures, a venture capital fund focusing on the development of northeastern Minnesota, seeks to combine social goals with financial returns. This marriage poses several challenges.